Each year brings with it a string of global events that take the world by surprise and inevitably affect global economic growth and trade. In 2016, the world watched as Britain voted to leave the European Union despite the consequences, especially those regarding trade in Europe. It was also the year we witnessed the U.S. elect businessman and reality show star Donald Trump as president.
Despite the fact that some of these global events caught the world off-guard with their unpredictability, careful observers will notice a few economic trends developing in 2017. Keep an eye on the following throughout 2017.
Europe Spirals as Brexit aftermath may lead to Italy leaving the EU
Britain exiting the European Union is the least of Europe’s worries, according to Carl Weinberg, chief economist at High Frequency.
While Brexit will remain an issue for the EU, the financial and economic implications won’t be as disruptive as expected due primarily to the nature of the exit. Instead, Europe should keep a close eye on Italy; Weinberg argues that recent reports show that the governing parties that support the unification of Europe are increasingly losing support. If this trend is to continue, there is a possibility that Italy will make the decision to move out of the European Zone and leave the European Union. A move like this could have Europe plunging head first into economic crisis, and a recession will be inevitable.
In our increasingly interconnected world, what happens in one country can easily affect the economic stability in others. Businesses who operate in multiple countries should keep an eye on the world economy as one part of an overall strategy to manage their global financials.
While most of the world was taken by surprise at the election of Donald Trump as U.S. president, there is no denying that his presidency will affect global trade and the worldwide economy. Already, we are seeing stocks reach record highs, leading to the rest of the international market reaching new lows. It seems that investors are pouring money into U.S. stock before Trump’s administration ushers in tax cuts and implements deregulation to reignite the country’s economic growth.
China Looks for a Boost; Could the Housing Market Be the Answer?
The Chinese economy has improved, with the real estate sector leading the way, reports Bloomberg. The housing market could play a vital role in boosting the country’s economy, especially if credit continues to be easy. A home-buying rush has taken over the major cities and is spreading to the rest of China. Even though this could lead to increasing debt-fueled investments, it doesn’t look as if there will be a stop to credit-fueled housing, especially since these sales have boosted the overall economy.
Japan Explores Economic Growth
The lack of economic growth in Japan and its inability to strengthen the yen has put pressure on the economy from the Bank of Japan. The BOJ has now switched its policy target from printing money to inflation rates. We’ll have to wait and see whether this will plunge Japan out of stagnation and promote economic expansion.
The rise of protectionism could reverse the last 50 years of global integration. This nativist political environment will drastically affect the global trade and economy. According to the International Monetary Fund, the implementation of this policy will spark a negative cycle. Tariffs and import charges will rise worldwide by 10 percent, which could lead to a fall of 15 percent in exports over the next few years.
Positive Global Growth
Despite the slow rate at which the international economy is growing, it is estimated that the world economy will experience stable growth of 2.8 percent in 2017; recessions are fading in the major emerging markets. These trends will have a direct or indirect effect on you and your business, and it is important to remain abreast of new developments and changes.
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